Real Estate Bill may not be hard on builders after all

Promoters, objecting to heavy fines and jail term, may have their way

The opposition to penal provisions like heavy fines and even a jail term for builders and promoters who fail to deliver on their promises and the clamour for leaving commercial properties out of the purview of the Real Estate (Regulation and Development) Bill, 2012, could pave way for alterations in the law which the Ministry of Housing and Urban Poverty Alleviation (HUPA) is keen on tabling in the budget session of Parliament.

Following a protracted tussle between the industry and the HUPA, and the intervention of the Urban Development Ministry, changes are now being considered to make the Bill more acceptable to the industry.

Informed sources told The Hindu that commercial properties could be taken out of the Bill’s mandate and the other changes would be about the penal provisions. “The industry has been protesting that the Bill is unduly harsh on them. So it is now being proposed that the penalties and punishment will be fleshed out so that there is clarity on what transgressions will invoke action,” a source said.

The sources indicated that the real estate industry managed to get the Urban Development Ministry’s support for its demand to keep shops and office spaces out of the Bill’s mandate.

As for other changes, “it is being proposed that the Union Urban Development Ministry will appoint the regulatory authority for Delhi. Since the Bill proposes the setting up of a regulatory authority in each State, it has come as a surprise that the UD Ministry wants to exert its control over the Delhi authority,” said the source.

The appointment of the national regulatory body, headed by a chairman, will be a matter of mutual decision involving both the Urban Development Ministry and the HUPA.

The Bill, touted as the first of its kind to regulate the real estate sector and protect he consumer, has in place checks to prevent builders from making false and exaggerated claims; overcharging consumers and diverting funds for newer projects, which sometimes leads to delays.

An official of the Urban Development Ministry, not wishing to be quoted, said: “One concern that the industry has is that there already exist provisions for legal recourse, there are consumer courts, there are the civil courts and consumers can seek help in any of these. One more regulatory body will only add to the multiplicity of authorities and will not prove an effective platform for redress.”

The official said the Ministry was asked to step in to resolve issues that affected the business of the industry. “Provisions like making it mandatory [for builders] to deposit at least 70 per cent of the funds received from buyers in a separate bank account and not diverting funds to other projects are not exactly practical. World over, real estate developers can raise money for other projects; funds are fungible depending on the criticality of the project.”